When Mayor Paul Soglin and other urban pioneers started playing around in the 1970s with what back then was the fairly radical idea of using tax incremental financing to help fix up blighted urban neighborhoods, Joe Gromacki was just a kid playing Little League baseball in Milwaukee.
Thirty-five years later, TIF is being used by cities across the country to fund a lot of different kinds of development projects, and Gromacki is considered an expert in the field. He is Madison's TIF coordinator, and Madison is known for its success with the projects. Over the past decades, Gromacki says, the city has done 65 of them, leveraging $1.3 billion of new assessed value from $95 million in loans. (Under TIF, cities provide subsidies for developments and then recoup their investments over time with increased property tax payments, or increments, generated by the improvements.) The lousy economy has him monitoring a couple closely. The scrutiny happens at the front end, too: Gromacki says the city only approves about a third to half of the requests it gets for the subsidies.
Yet some people have had a tiff over the program here, claiming developers and even politicians abuse it. Concerns that the city's practices were neither consistent nor clear led the city to revamp them several times, formally adopting its most recent set of policies in 2009. These new policies have been sorely tested by a project that is one of the most controversial in the city's history: the Edgewater hotel redevelopment. Last year, after two years of bruising and confusing debate, then-Mayor Dave Cieslewicz, the City Council and developer Bob Dunn agreed to a deal that would provide the luxury hotel redevelopment project $16 million in TIF, assistance that Mayor Paul Soglin now says the city can no longer afford. (The current City Council needs to decide whether to maintain the funds during this month's budget deliberations.)
Gromacki was a key player in the behind-the-scenes drama of that deal, though he says that he was often left out of the loop while the mayor hammered out details with the developer and other supporters. Still, he devoted so much time to it that he and other swamped city staff joked it could have its own reality TV show called "ADE: All Day Edgewater." Gromacki says he escaped the fray by writing music, practicing the guitar, and hanging out with his three kids and wife.
Here are his thoughts on the art of making deals and putting TIF projects together in general and on the Edgewater in particular.
The Capital Times: How does somebody become a TIF coordinator?
Joe Gromacki: I zigged when I should have zagged on the way to law school. I was at the UW-Whitewater majoring in English and psychology. Then I took an internship with U.S. Congressman Les Aspin. I worked as a staff aide for him for a number of years. About 1986 Chrysler pulled out of Kenosha so I got assigned to economic development stuff. I was rubbing elbows with a lot of folks who were barnstormers in economic development, which in Wisconsin was a relatively new field. We didn't have it until we started losing the old manufacturing jobs. I found economic development interesting. One day you'd start working on some small machine shop with 100 employees. And then you'd be helping somebody who had a problem getting a permit to use water for their sprinkler system. So I had to learn about stuff from engineering to land use in a hurry. I was getting force fed like a goose.
CT: Would you call yourself a fan of TIF?
JG: I'm not a philosopher. People will try to make moral arguments why we should do or not do TIF. But it's not a matter of right or wrong. It's a matter of what works or doesn't. Some people say don't do projects like Edgewater that take away the sovereign rights of neighborhoods. Well, you can't put that on a spreadsheet, and that's the world I live in. I'm a numbers guy.
CT: Madison recently revamped its TIF rules. Why?
JG: A lot of communities struggle with how to make these decisions. The first stage is to get a philosophy, a set of policies, in place. Then you need the will and the backbone to implement them and defend them. In '99 when I first got here, we had a very loose set of rules. Nothing was written down. So the developers were saying we need some predictability. The alders were looking for some parameters to operate within — types of projects we wanted to do, types of standards. It took something like 25 drafts! And out of that came a five-page document, and then it morphed while neighborhood groups, advocacy groups and developers went at it. It took nine years. Nine years of my life I will never get back!
CT: What do you think of the result?
JG: I don't get to grade it. I have to implement it. But consistency, having a set of rules, is very valuable. The biggest thing you worry about in government is precedent. Everybody wants the deal that the last guy got. We had developers that were requesting various amounts of TIF so that in some cases every amount of TIF went back into the projects so we never had any excess taxes. We had developers asking for (assistance that equaled) 100 percent or more (of the city's tax increment benefit). Or in the case of the Edgewater, 240 percent! Now. Are there still exceptions? Yes. I am just the umpire. I get to say that is inside or that is outside of the strike zone. But the council can say well, we realize that, thank you very much, but we want to do this project anyway. There's no law that says they have to follow their own policy.
CT: Don't developers often push to get exceptions to the policy?
JG: Absolutely. The developers try to maximize the city's input in terms of TIF and minimize their input in terms of equity. They try not to give a guarantee. That's their game plan. But we don't just sit down and say how would you like it? In large bills? We analyze it carefully. We want the developer to be on the hook so they are feeling the pain, too. We want them to be in as much as us if not more. We want them to have to pay the guarantee so the taxpayer is always covered.
CT: I've heard that you are a tough negotiator.
JG: I had a conference call once where someone said you blankety-blank blank and got up and slammed the door and left. The other partner is sitting there real quiet. I could just visualize the poor guy. He said "Joe, you still there?" I said yes. He said "Can I call you back?" I said, yeah sure. So he went into his partner and said "What the hell?" Eventually we did the deal. I had another guy bang his hand on the table and tell Dave [then-mayor Cieslewicz) "Will you tell this guy to give me what I want?" And I leaned across the table and said "I'm right here, I'm all ears. What you want we can't give."
CT: What was Edgewater developer Bob Dunn like to negotiate with?
JG: A formidable adversary. He argued about everything. As soon as we resolved one thing he'd pull up another thing. He'd try to wear us down and I'd dig in and push back. Dave didn't always like that. But this is a rough game. These are big guys who play big games and you have to play hard back. But I felt that some of this project was already preordained, in his mind anyway. He was very inflexible with some things. We actually left the table a couple of times.
CT: There's a lot of money involved in this. Sixteen million in TIF for the public terrace.
JG: I spent a lot of time analyzing that 16 million bucks and after all the stuff that the policymakers wanted and the neighbors wanted I couldn't make it go away. I said "We can't afford the terrace. Why are we doing this?" Bob dug in his heels and said "This is my vision and everybody loves it. It will look great." Well, my house will look great with a pool in the back but we can't afford it, you know?
CT: Had you ever had a TIF project for an amenity like this before?
JG: No, that was the other weird thing about this. Most projects are pretty straight. You know the cost to build a hotel. You know the cost to build a parking ramp. I have a database of comps. But a public plaza? I have absolutely nothing to gauge that on. I tried digging the Monona Terrace numbers up. Those are 20 years old! So I had to hire an independent engineer to come in and tell me is this for real.
CT: Did that make you feel better?
JG: It was the best I could do.
CT: Wasn't that $16 million part of the deal even before you got involved?
JG: Yeah, right. This is something I am still sorting out. I think I was misled, to be quite honest with you. It was about a third of the way into negotiations where I got them to fess up. So then I went back to the mayor's office and said this isn't infrastructure anymore, this guy wants $16 million for some private costs that we're going to have some kind of limited rights of access to. And it was, well, you know, "just make it work."
CT: So that's pretty much what the mayor's office told you, "make it work"?
JG: "Make it work." Again, my role is to say what the strike zone was. I was pointing out we were looking at at least four exceptions to policy. So I pushed back. I walked away and said "We're out of here. This is untenable." We go back to the mayor's office. And the directive was go with it.
CT: It all sounds nightmarish.
JG: (Big sigh.) I can say that the approach to this project was different than anything I had ever experienced before. I can tell you that in all honesty.
CT: I hear that many city employees were really stressed during all this.
JG: I am not going to comment on my stress. I will say that it was difficult to negotiate when things had already been agreed to.
CT: What is your sense of how Mayor Paul Soglin will handle the TIF process?
JG: What Paul has articulated to staff is that Number One, we don't have to check our opinions at the door anymore. He won't come into a meeting with a preconceived notion until he has listened to everybody. I get to underwrite the project, I get to look at the costs and say here are the parameters, here is what the issues are, and I don't have to reinterpret that, I don't have to make it fit. I just can say what it is. Then he will have a team of folks who will evaluate that.
CT: So it's more of a team approach?
JG: Yeah. The city has had a TIF team for years: the comptroller, the city attorney's office, myself, and the real estate manager would meet as a team to analyze TIF projects. But under Dave it fell into disuse. It was more of a divided approach where people would get called in individually and the effect was we lost that cohesion of thought and that exchange of ideas.
CT: Sounds like a tough job.
JG: There's days I just want to take up welding. I'm as equally criticized for doing a project as not doing a project. But I'm the umpire. You see the play, and all you can do is call it.